FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000.
Commission file number: 000-28089
WARPRADIO.COM, INC.
--------------------------------------------
(Name of Small Business Issuer in its charter)
Nevada 87-0538158
------------------------------ ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6535 South Dayton Street, Suite 3000
Greenwood Village, Colorado 80111
---------------------------------
(Address of principal executive offices)
(Zip Code)
(303) 799-9118
--------------
(Issuer's telephone number, including area code)
Indicate by check mark whether the Issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------- --------
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.001 Par Value, 10,228,796 shares as of June 30, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION.
-------------------------------
ITEM 1. FINANCIAL STATEMENTS.
WARPRADIO.COM, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 2000
ASSETS
------
Current Assets:
Cash and cash equivalents $ --
Accounts Receivable - trade 111,073
Accrued interest receivable 723
Note receivable - stockholder 20,500
-----------
Total Current Assets 132,296
-----------
Property and Equipment, at cost:
Office equipment 214,176
Furniture 16,547
-----------
230,723
Less accumulated depreciation (20,084)
-----------
Net Property and Equipment 210,639
-----------
Other Assets:
Deposits 8,417
-----------
Total Other Assets 8,417
-----------
Total Assets $ 351,352
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Bank overdraft $ 5,632
Accounts payable:
Trade 41,918
Stockholder 7,000
Accrued expenses:
Payroll taxes 58,430
-----------
Total Current Liabilities 112,980
-----------
Commitments and Contingencies --
Stockholders' Equity:
Preferred stock: $.001 par value, 7,000,000 shares
authorized, none issued or outstanding --
Common stock: $.001 par value, 50,000,000 shares
authorized, 10,228,796 shares issued and outstanding 10,229
Additional paid in capital 3,120,700
Accumulated deficit (2,892,557)
-----------
Total Stockholders' Equity 238,372
-----------
Total Liabilities and Stockholders' Equity $ 351,352
===========
See notes to unaudited condensed
consolidated financial statements.
-1-
<PAGE>
<TABLE>
<CAPTION>
WARPRADIO.COM, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months
Ended Six Months
June 30, Ended Inception To
-------------- June 30, June 30,
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue $ 174,653 $ -- $ 175,945 $ --
------------ ------------ ------------ ------------
Operating Expenses:
Stock compensation 829,641 -- 829,641 3,202
Depreciation 7,000 1,420 14,000 1,420
Selling, general and administrative 285,978 149,698 636,193 149,698
------------ ------------ ------------ ------------
Total Operating Expenses 1,122,619 151,118 1,479,834 154,320
------------ ------------ ------------ ------------
Loss From Operations (947,966) (151,118) (1,303,889) (154,320)
------------ ------------ ------------ ------------
Other Income (Expense):
Interest income 974 -- 6,746 --
Interest expense (730) -- (730) --
------------ ------------ ------------ ------------
Total Other Income (Expense) 244 -- 6,016 --
------------ ------------ ------------ ------------
Net Income (Loss) $ (947,722) $ (151,118) $ (1,297,873) $ (154,320)
============ ============ ============ ============
Net Income (Loss) Per Basic and
Diluted Share of Common Stock $ (.09) $ (.02) $ (.13) $ (.02)
Weighted Average Number of Basic and
Diluted Common Shares Outstanding 10,228,796 7,319,500 10,228,396 7,319,500
See notes to unaudited condensed
consolidated financial statements.
-2-
<PAGE>
WARPRADIO.COM, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended Inception to
June 30, June 30,
2000 1999
---- ----
Cash Flows From Operating Activities:
Net income (loss) $(1,297,873) $ (154,320)
Adjustments to reconcile net income (loss) to net
cash (used) by operating activities:
Depreciation 14,000 1,420
Common stock issued for services -- 3,202
Compensation from issuance of stock options 829,641 --
Changes in assets and liabilities:
Accounts receivable (111,073) --
Accrued interest receivable (723) --
Accounts payable 20,149 25,590
Accrued expenses 43,021 5,931
----------- -----------
Net Cash (Used) By Operating Activities (502,858) (118,177)
----------- -----------
Cash Flows From Investing Activities:
Capital expenditures (148,638) (35,852)
Deposits (2,746) --
Loan to stockholder (20,500) --
----------- -----------
Net Cash (Used) By Investing Activities (171,884) (35,852)
----------- -----------
Cash Flows From Financing Activities:
Bank overdraft 5,632 --
Proceeds from borrowing 7,000 208,000
----------- -----------
Net Cash Provided By Financing Activities 12,632 208,000
----------- -----------
Net Increase (Decrease) in Cash and Cash Equivalents (662,110) 53,971
Cash and Cash Equivalents at Beginning of Period 662,110 --
----------- -----------
Cash and Cash Equivalents at End of Period $ -- $ 53,971
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
Income taxes -- --
See notes to unaudited condensed
consolidated financial statements.
-3-
</TABLE>
<PAGE>
WARPRADIO.COM, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying financial information of the Company is prepared in accordance
with the rules prescribed for filing condensed interim financial statements and,
accordingly, does not include all disclosures that may be necessary for complete
financial statements prepared in accordance with generally accepted accounting
principles. The disclosures presented are sufficient, in management's opinion,
to make the interim information presented not misleading. All adjustments,
consisting of normal recurring adjustments, which are necessary so as to make
the interim information not misleading, have been made. Results of operations
for the six months ended June 30, 2000 are not necessarily indicative of results
of operations that may be expected for the year ending December 31, 2000. It is
recommended that this financial information be read with the complete financial
statements included in the Company's Annual Report on Form 10-KSB for the year
ended December 31, 1999 previously filed with the Securities and Exchange
Commission.
Development Stage
The Company emerged from the development stage in May 2000.
Per Share Information
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share," which specifies the method of computation,
presentation and disclosure for earnings per share. SFAS No. 128 requires the
presentation of two earnings per share amounts, basic and diluted.
Basic earnings per share is calculated using the average number of common shares
outstanding. Diluted earnings per share is computed on the basis of the average
number of common shares outstanding plus the dilutive effect of outstanding
stock options using the "treasury stock" method. Stock options to purchase
575,000 shares of common stock at June 30, 2000 were not included in the
computation of diluted earnings per share because the Company had a net loss and
their effect would be anti-dilutive.
-4-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
------------------------------------------------------------------
Introduction
The following section contains forward-looking statements that involve
risks and uncertainties. Our results could differ materially from those
anticipated in these forward-looking statements as a result of certain factors.
This discussion of the Company's financial condition and results of
operations for the three and six months ending June 30, 2000, should be read in
conjunction with the Company's financial statements herein.
Results of Operations
Three months ended June 30, 2000 versus three months ended June 30, 1999
Revenues were $174,653 for 2000. No revenues were generated in 1999.
Revenues consist of radio advertising sales. The increase in revenue is
attributed to the increase in radio stations contracted by the Company, and its
ability to resell the inventory to national advertisers.
Operating expenses increased to $1,122,619 for 2000, compared to $151,118
for 1999. The increase of $971,501 was due to stock compensation expense of
$829,641 for the issuance of employee stock options in April 2000 and an
increase of $136,280 in selling, general and administrative expenses ("S,G&A").
The increase in S,G&A is due to the expansion of our sales representative and
technical support staff.
Net loss for 2000 was $947,722 compared to $151,118 for 1999. The increase
of $796,604 was due to the increase in operating expenses.
Six months ended June 30, 2000 versus six months ended June 30, 1999
Revenues were $175,945 for 2000. No revenues were generated in 1999.
Revenues consist of radio advertising sales. The increase in revenue is
attributed to the increase in radio stations contracted by the Company and its
ability to resell the inventory to national advertisers.
Operating expenses increased to $1,479,834 in 2000, compared to $154,320
for 1999. The increase of $1,325,514 was due to stock compensation expense of
$829,641 for the issuance of employee stock options in April 2000 and an
increase of $486,495 in selling, general and administrative expenses. The
increase in S,G&A is due to the expansion of our sales representative and
technical support staff.
Net loss for 2000 was $1,297,873 compared to $154,320 for 1999. The
increase of $1,143,553 was due to the increase in operating expenses.
Additionally, the limited operating history of the Company makes the
prediction of future operating results difficult or impossible. The Company
expects to continue to incur significant losses on a quarterly and annual basis
for the foreseeable future. For these and other reasons, there can be no
assurance that the Company will ever achieve profitability or, if profitability
is achieved, that it can be sustained.
5
<PAGE>
The Company has rapidly and significantly expanded its operations and
anticipates that significant expansion of its operations will continue to be
required in order to address potential market opportunities. The Company expects
to increase its personnel significantly in the near future. The Company's recent
growth has placed, and is expected to continue to place, a significant strain on
its managerial, operational and financial resources and systems.
Liquidity and Capital Resources
The Company anticipates that in the near term it will incur significant
continuing losses due to ongoing substantial operating expenses offset by
negligible revenue. The Company currently barters an average of two minutes of
advertising inventory per day Monday through Sunday with each contracted radio
station that uses the Company's streaming services. The Company presently
expects future revenues to stem from sales of bartered advertising time.
Accounts receivable grew to $111,073 as of June 30, 2000. The increase in
revenue consisted of agency-placed advertising revenue accounts. The increase in
accounts receivable was due to the increase in advertising sales for the period.
Advertising revenues placed by an agency typically are collected in a 90 days
period. We expect advertising revenue accounts generally to be collected with in
60 to 90 days in the future.
The Company purchased equipment during the six months ended June 30, 2000
for the amount of $148,638. The Company realized a need for increasing its
hardware infrastructure to facilitate additional demands on the servers used to
stream audio feeds. The Company believes to be competitive it needs from time to
time to purchase state of the art equipment to enhance the services provided to
radio stations.
Currently, the Company has commitments under non-cancelable operating lease
for office facilities requiring payments of $8,374 per month until November
2000, and then of $8,507 until October 2002.
To fund future operations we are currently in the process of raising funds
through a private financing and have received $126,000 in July and August and
anticipate up to $1 million for this round. The Company is negotiating to raise
additional capital for expansion and working capital either through debt or
equity securities to strategic partners. There can be no assurance that
additional financing, will be available on terms attractive to us. Our failure
to raise capital when needed could have a material adverse effect on our
business, results of operations and financial condition. If additional funds are
raised through the issuance of equity securities, the percentage ownership of
our then current shareholders will be reduced. Furthermore, these equity
securities might have rights, preferences or privileges senior to those of our
common stock.
The Company expects to incur significantly higher costs, particularly
marketing and advertising costs, products content and development costs, general
and administrative costs and additional technology and equipment purchase costs
in order to expand the Company's business. The Company expects to expend the
largest portion of existing capital on increasing the Company's technical staff,
adding key management level employees and purchasing additional technology and
equipment. In the event revenue is insufficient to meet our operating expenses,
the Company will seek additional funding through debt or equity offerings. The
Company currently has no commitments for any such funding and cannot assure it
will be able to obtain such funding if otherwise required to do so.
6
<PAGE>
PART II. OTHER INFORMATION.
ITEM 1. Legal proceedings.
None.
ITEM 2. Changes in securities.
None.
ITEM 3. Defaults upon senior securities.
None.
ITEM 4. Submission of matters to a vote of security holders.
The Company held its annual shareholders meeting June 13, 2000. Denise Sutton
was voted in as director by 7,996,677 shares. This reflected 84 proxies received
by mail and in person. The position of director was the only item voted on by
proxy.
ITEM 5. Other information.
None.
ITEM 6. Exhibits and reports on Form 8-K.
Reports on Form 8-K: During the three months covered by this report, the Company
filed no reports on form 8-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
Date: August 14, 2000 WarpRadio.com, Inc.
(Registrant)
/s/ Denise Sutton
---------------------------------------------
Denise Sutton
Chief Executive Officer, Chief Financial
Officer (Principal Accounting Officer),
and Director
7
